Monthly Archives: August 2013

Imagine handing over your personal financial information, including your home address, Social Security number, birth date, and amount you earn each month, to a dealership finance manager who just happens to have a history of engaging in identity theft. Creepy, no?

Unfortunately, some dealers fail to do even basic background checks of prospective employees. As a result, you may end up exposed to identity theft. The FTC has issued “Red Flag” rules aimed at curbing ID theft at auto dealerships, which is a step forward, but — they don’t have the staff or resources to police compliance.

Bottom line: This is yet another reason to ALWAYS get your financing lined up with a reputable lender BEFORE you shop for a car.

The National Highway Traffic Safety Administration has announced that the Tesla Model S earned a 5-star rating — in each crash configuration — front, side, rear, and rollover.

The agency’s testing also showed that the Model S set a new record for the lowest likelihood of injury to occupants, based on specific scoring.

According to Tesla, the vehicle’s unique design creates major injury-prevention advantages. The California-based automaker explained, “The Model S has the advantage in the front of not having a large gasoline engine block, thus creating a much longer crumple zone to absorb a high speed impact. This is fundamentally a force over distance problem – the longer the crumple zone, the more time there is to slow down occupants at g loads that do not cause injuries.”

The sedan’s low center of gravity and the mid-mount position of the battery pack also make the vehicle remarkably stable and unlikely to tip over, particularly when compared with SUVs and minivans with much higher centers of gravity.

Despite its stellar safety performance, Tesla still faces an uphill battle with auto dealers, who seek to force the company to stop selling vehicles directly to the public, instead of making its customers spend an average of 4 hours at a car dealership in order to drive a Tesla home.

“If anyone doubted that Hillary Clinton is a polarizing figure, all he had to do was look at the brouhaha caused by the National Automobile Dealers Association’s selection of her as a keynote speaker at its convention next year in New Orleans…

The episode did demonstrate that the American new-vehicle dealer, who I’ve always felt is the last of the entrepreneurs in North America, basically has no love for liberals…”

New car dealers like to project the image that they are above engaging in shady practices prevalent at “buy-here pay here” auto dealerships. Among the shameful litany: charging exorbitant interest rates and selling junk cars that break down soon after purchase, only to be repossessed when the hapless owners can’t drive them, lose income, and fall behind on payments. Then re-selling the same cars over and over again — a practice known as “churning” — making a killing on each transaction, and often trapping multiple consumers into paying for the same car.

“Buy-here, pay-here” sales tactics were painstakingly documented in an award-winning series by Los Angeles Times reporter Ken Bensinger, who examined over 2 million records and exposed who the worst “churners” are among “buy-here, pay-here” dealers in California.

But — the reality is that thousands of new car dealers own “buy-here, pay-here” car lots. According to Automotive News, of 20,000 members of the National Independent Automobile Dealers Association, ” ‘just under 10%’ are franchised new-car dealers who have joined under their franchised dealership name or under the names of their separate buy-here, pay-here operations.” — Automotive News, July 22, 2013

2012 was the most profitable year EVER for auto dealers, according to an annual study by the National Automobile Dealers Association. The study found that profits at the average U.S. dealership rose to over $2,036,000 in today’s dollars. — Automotive News, July 8, 2012

High-cost service contracts are major profit centers for auto dealers. One dealer told Automotive News that in 2005 his gross profit per extended service contract was $436. By the end of last year, it had skyrocketed to $1,178. (Automotive News, March 11, 2013)

Consumers anxious to avoid unexpected, costly repairs often buy them without realizing they are usually full of loopholes and exclusions that allow companies to deny coverage. For example, they usually fail to cover prior damage, even if that’s the cause of the problem.

Some auto dealers pressure their finance managers to meet a quota of service contract sales, or be fired. Others have tried to sell service contracts at lower, more competitive prices, but then faced litigation by the companies that offer them.

Some dealers mislead car buyers into thinking that they have to buy a service contract in order to get financing. Legal experts say that such deception is illegal, but can be difficult to prove.

CARS recommends that, instead of getting a service contract, it’s smarter to spend about $000 for a thorough inspection before you buy. Then if the car has major problems, you can decide if you still want it, or take your business somewhere else. Also — beware of dealers who try to sell you service contracts that kick in at the same time as the warranty, and expire just when you might need them.

According to a study commissioned by the National Automobile Dealers Association, women hold only 21% of all dealership positions. Women account for even fewer service advisor positions, at 16%, and just 6% of service managers.

The president of the consulting firm that conducted the study, DeltaTrends, explained that dealership “service departments can have a culture that’s ‘frankly hostile toward women.’ ” — Automotive News, May 6, 2013

Angry auto dealers are threatening to boycott the National Auto Dealers Association’s annual convention in New Orleans next January, thanks to the NADA’s decision to invite Hillary Clinton to keynote the event.

In comments posted on the Automotive News website, dealers are sounding off, unleashing an angry tirade. One commenter writes:

“NADA moves one giant step closer to irrelevance with the selection of Clinton as a speaker. What part of political neutrality do they not understand? Every dealer I know is outraged….”

“This hag needs to emigrate – now that would make me VERY happy.”

According to the report in Automotive News, “a Georgia dealer consultant who writes columns for auto industry publications, says he was deluged by profane responses to his Facebook post asking people what they thought of NADA’s pick.” (Automotive News, July 29, 2013)

According to Open Secrets, auto dealers have a history of lavish donations to political candidates and parties –predominantly to Republicans. During the 2011- 2012 campaign cycle, auto dealers gave $1,473,925 to Romney, but only a relatively paltry $118,394 to Obama.

Ironically, during the Clinton presidency, auto sales burgeoned and car dealers flourished. In stark contrast, George Bush’s economic policies proved disastrous for the entire auto industry, resulting in the bankruptcies of GM and Chrysler, and record numbers of dealer closings.

Ever wonder why you can’t just order a new car over the internet, directly from the manufacturer? Then pick it up at the factory, or a local showroom, like people do in Europe? It’s because U.S. auto dealers have used their political muscle to get laws passed in all 50 states that give them a special monopoly. Those state franchise laws insulate them from having to compete with manufacturers for your business.

Car dealers got the laws enacted because they know that, given a choice, most car buyers would never subject themselves to the typical car-buying experience.

Car dealers are now attacking electric car manufacturer Tesla in court and in state legislatures, seeking to bar the company from selling its highly-praised electric vehicles directly to the public. Tesla is wise to be wary of auto dealers. As a group, auto dealers are throwbacks to the era of horse-trading. They have been among the most aggressive opponents of advances in fuel economy standards. They also have a long history of opposing mandates to produce electric vehicles.

Car dealers repeatedly sued the U.S. Environmental Protection Agency, seeking to block higher fuel economy standards. They waged all-out war against improved fuel economy in Congress. The end result, of course, was that when the price of gas rose, the value of their gas-guzzling products tanked, leaving their customers upside down in their overpriced loans. Then we bailed them out, at taxpayer expense, including the $3 billion they got from “Cash for Clunkers.”

Plus auto dealers commonly engage in a laundry list of shady or downright illegal practices that add billions onto the price of financing cars — hard-earned money that could be spent to get a newer, safer, cleaner car.

Think you might like to have the freedom to buy directly from a manufacturer someday? Now it’s only a pipe dream for car buyers in most states — unless you’re willing to travel to Europe — but someday it may become reality here in the U.S.